Friday, February 22, 2008

The question: (in a survey of about 100 architects in the U.S.) fromThe Whetstone Groupin Iowa.

Approximately what percentage of your annual fees do you spend on marketing and sales each year?

When asked this question, 11 respondents (11 per cent) replied that they didn't know. Of those that answered, the average percentage of annual fees reported was 4.84 per cent. Larger firms (those greater than $15mm in annual fees) tend to spend a little more: 5.9 per cent of annual fees vs. 3.93 for firms under $15mm annual revenue.

There does not appear to be a correlation between the size of the marketing budget and annual growth rates.

This is interesting on several levels. First, if you are looking for benchmarking 'norms' on marketing budgets for an architectural practice; you now have a starting number. The suggestion is if you are doing say $20 million in annual billings you would spend on average $1.18 million on marketing and sales. Of course, note that more than 10 per cent of the firms surveyed don't even know how much they are spending on marketing.

But the remark "there does not appear to be a correlation between the size of the marketing budget and annual growth rates" is especially important. If on average there is no advantage in spending more on marketing and business development if you want to grow, then how valid is the expense?

My thought on this topic is that it is clearly what you do more than how much you spend (but if you are spending less than four per cent of current annual billings on marketing and business development you are either doing something brilliantly or may be restraining your growth -- possible, for example, if you are a one-person band with a solid client list and ability to drum up new business when you need it.)

Possibly larger firms spend a lot of 'wasted' money on things like paid sponsorships, brand development and image management -- of course they have the profits/retained earnings for this type of stuff; and once you’ve built a department/budget, you are typically loathe to see it reduced. So you find work for yourself/team to justify the numbers.

Maybe architects (like other businesses within the AEC sector) should look at another question within the survey for the answer. In order of effectiveness, the top five marketing resources are Referral Sources, Client Referrals, Speaking, Articles, Industry Groups, Social Events, and Seminars, with the first, "Networking with referral sources" ranked significantly higher than the others. So it seems you should spend most of your budget on:

a) Cultivating your referrals;

b) Keeping your current clients happy -- so happy they refer others;

c) Developing a solid PR/communications strategy to achieve recognition as the leader of expertise within your area, connecting writing and speaking with industry groups within your market area.

Thanks to Lisa Rhatigan, a shareholder and senior vice president of he Whetstone Group, for providing her survey results. She published her findings in The SMPS Marketerand can be reached at 319-447-6403 orlisa@thewhetstonegroup.com.

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